Word is FX Carry Trades Are Being Unwound

In short, not good for equity prices.

Take a look at the Euro and USD (via FXE/UUP)

The pair is falling, meaning the dollar is gaining.

 FXE (Euro) a 5 min negative divergence, but note that it wasn't until FXE first posted a breakout new high or "head-fake" which is so common before reversals now it's nearly a prerequisite.

And UUP, makes a new low into a positive divergence before moving up today.

JPY will be interesting as it gains against the dollar, possibly sending it to the G7 intervention levels

SLV/GLD

For more then a few weeks now I've been saying SLV has been stronger then GLD, that appears to remain true. We have two pullbacks, but each are of a very different character. First SLV

 SLV Daily chart and 3C, there's no negative divergence here, just confirmation of the uptrend.

 On the hourly chart, again confirmation

 The 30 minute is close to being negative, but more or less it's still confirmation.

 The 15 minute is almost perfect confirmation.

 Only at the 5 min and 1 min below do we have negative divergences and SLV is pulling back so it makes perfect sense.

Now GLD

 First, I included the sell signal on the Stoch/RSI indicator, I didn't show it on SLV because RSI is in confirmation, there's no negative divergence so no sell signal, that's a big difference.

 The daily 3C GLD chart looks almost exactly like AA's did, a negative divergence on an important breakout.

 We see the same negative divergence on the 30 min 3C chart at the same breakout point.

 The 15 min chart is in a leading negative divergence which is the worst kind, while SLV was in near perfect confirmation of the uptrend.

And the 5 min is negative as it should be on a pullback, but I suspect that GLD may experience more then a pullback. Should the support at the $140.75 area give way, we could see a very fast fall in GLD. It would probably be a trade worth looking closely at.

Market Update

It looks like an intraday bounce is in the making.

 I haven't tested the Stoch/RSI intraday, but there's a signal, so lets see what it does. The DIA is in a 1 min leading positive divergence.

 The 5 min DIA is in a relative positive divergence

 IWM is in a leading positive divergence (the lateral price movement is also a hint)

 IWM 5 min in a relative positive divergence

 QQQ in a 1 min leading positive divergence

 The SPY saw a volume spike near the bottom, also a typical feature before an intraday reversal.

 The Stoch/RSI 1 min on the SPY giving a positive signal

And the SPY 1 min in a leading positive divergence.

I can't say how far this will go yet, but this early with the market down this much, it has to avoid an oversold condition so an intraday bounce here makes sense. If there are shorts you like, this may be the time to use strength to dip your toes in the water, don't forget about EDZ, it's looking great.

Trade Deficit and Import Price Inflation

The Trade Deficit, like most economic data can be spun however you want it to appear. You can say it's better because it came in at $45.8 billion vs $47 billion in January, or you can say it disappointed at $45.8 as consensus was for $44 billion.This is why earnings and economic reports can look so different in the media, one headline saying there's improvement, another saying the Trade Deficit was a huge disappointment.

The one thing in the report and what has been a material fundamental factor for well over a year and probably will be the biggest underlying fundamental factor this earnings season is the continued price inflation. You can't really argue this one to much, the Import Price index came in at 2.7 from 1.4 previously and consensus of 2.1-Lose, Lose.

This will hit every sector in the economy in one way or another and I think it will be a central theme in earnings this quarter. Just another report in a long line of reports confirming what we've known for a long time and something the Fed ignored as long as possible, Inflation is here and I don't mean as if it just arrived in the manufacturing sector, it's so embedded now that it's creeping into consumer prices.

That's the Fed's easy money, Chinese Finger Trap that will have to be unwound and in the process may create the first secular bear market in equities.

AAPL -A Tool

You saw the post yesterday on AAPl and the channel

This a.m. it looks like someone is desperately trying to halt the slide in the market and their seem to be having the battle over at AAPL.

 Positive, but a real struggle.

Late in the afternoon the positive divergence picked up, even more so since this morning. Let's see how this plays out, AA certainly spooked the market and I think for good reason.

AA and Last Night's Video

This post is especially for all of you 3C users. When I gave you the code I told you, there's a steep learning curve with 3C, you are learning to look at the market in a different way, to see how the market internals and cycles work and how much influence Wall Street has.

Even I am learning some lessons still and I invented 3C and have been using it for a looong time. Yesterday afternoon I said this about AA,

"I'll get the 3C charts out soon, long term charts are negative. Short term charts are more or less in line, the mid terms are a bit questionable, otherwise I'd say AA is not going to have a good report."


There was one chart that stood out, that didn't fit in with the consistency of the others.


In this post I showed you the 15 minute chart that I called a possible anomaly.


It turns out it was. Usually, as I explain in this video, one version of 3C works best for each individual stock, but as the video shows, the other two versions looked identical on the 15 minute chart and matched everything else, AA was an earnings short. So the point is, when something just doesn't fit, see if you can find confirmation in the other two versions, not just one version because that allows you to cherry pick and that's not objective, both versions should match. You'll see that they did in the video above.

Second Day Down In USO

And thus far we've passed the first target, which was to be expected, we are nearing the second target and I want you to keep in mind what I said about this yesterday. It appears they'll shake the tree hard on this one and as I said, you may look at the chart when all is said and done and not even want to buy USO, but I remain very positive on this move, it's overdue, it's a good opportunity and shortly we will see the locals snapping up USO. We haven't even hit the more likely second target or the extreme 3rd target.


Targets can be found here.

Your main advantage over Wall Street is patience, you can wait, you don't have to be in the market al of the time. Use that to your advantage with all trades, but especially USO.

USO daily

EARNINGS ARE A BLAST!

AA just kicked off earnings season and if you just looked at the headlines, you'd think they beat with "Record this and that" or "best since xyz", the fact is they missed on several crucial numbers: $100 million dollar miss to revenue, EBITDA of $955 million misses by $60 million, Cap-ex of $204 mm is below consensus of $475m.

Other then that, everything is rosy and I just can't seem to follow the AH trade as it first seemed to be halted, then Yahoo showed AA trading up in AH and now from what I see on my screen, they are trading down significantly around $17.15 (down about -3.2%).

Here are the 3C charts, which are largely negative, there's one chart that kept me from calling this  short earnings play, the 15 min, which I don't know if it's an anomaly or caught between a couple of cycles. Please do refer to the previous chart I posted asking and showing some evidence of a possible major top in AA.

So far the market is down a bit in AH, but has largely taken this miss in stride.

 The bid/ask in blue at the right around the $17.20 area currently.

 The hourly 3C chart is crushingly horrid. Note the final divergence on a false breakout play (again, this is a sign of the times, the market does this so often that it's nearly predictable 85% of the time).

 The 30 min chart, not looking good either.

 Here's the monkey wrench-the 15 min chart, if it were not for this chart, I'd have called a short earnings play on AA.

 The 5 min and 1 min below are pretty much in line with price and insignificant.

So, we'll see what the market thinks of guidance in the days to come (it usually takes a few days for all the games to pass and to get a true feel for what AA will be doing). This is not a great start for the earnings season, but it's one company so we can't read too much into it by itself.

It looks like AA Missed and is Halted in AH trading

AA Earnings

A possible top?

I'll get the 3C charts out soon, long term charts are negative. Short term charts are more or less in line, the mid terms are a bit questionable, otherwise I'd say AA is not going to have a good report.